To elucidate structure-function relationships of stromelysin-3, a putative matrix metalloproteinase originally identified at the tumor-stromal cell interface in breast carcinomas, the human cDNA was expressed in mammalian cells, and its products were isolated and characterized. In stably transfected cells, stromelysin-3 was recovered as a complex mixture of species ranging in size from approximately 20 to 65 kDa. Among these products, a major 45-kDa species with an N terminus of Phe98 and an intact C-terminal domain was identified as a true endopeptidase on the basis of its ability to cleave the bait region of alpha 2-macroglobulin between Phe684 and Tyr685, a site identical to that recognized by stromelysin-1. However, unlike stromelysin-1 or other members of the matrix metalloproteinase family, the mature form of stromelysin-3 was unable to hydrolyze a range of extracellular matrix molecules associated with either the basement membrane or interstitium. To probe for alternate substrates among tumor cell-derived products, purified stromelysin-3 was incubated with [35S]methionine-labeled medium conditioned by the breast cancer cell line, MCF-7. Under these conditions, a single, tumor cell-derived protein was hydrolyzed as assessed by sodium dodecyl sulfate-polyacrylamide gel electrophoresis and autoradiography. Following anion-exchange chromatography and preparative gel electrophoresis, the stromelysin-3 substrate was identified by N-terminal sequencing as the serine proteinase inhibitor, alpha 1-proteinase inhibitor. Further studies demonstrated that stromelysin-3 rapidly destroyed the antiproteolytic function of alpha 1-proteinase inhibitor by cleaving the antiproteinase at a distinct site between Ala350 and Met351 within the reactive-site loop. Together, these data not only demonstrate that human stromelysin-3 acts as a powerful endopeptidase with a restricted substrate specificity distinct from all other matrix metalloproteinases, but also serve to identify serine proteinase inhibitors as potential physiologic targets at sites of extracellular matrix remodeling.